The Apprenticeship Levy – Guide for Employers

Find out what the Apprenticeship Levy is and how it affects you as an employer.

The way apprenticeships are funded in the UK is changing with the introduction of the Apprenticeship Levy.

This came into effect as of 6th April 2016.

What Is the Apprenticeship Levy?

In its most basic sense, the Apprenticeship Levy is a tax on all UK employers that support the funding of apprenticeships.

It applies to both private and public companies which pay more £3 million in wages.

If a company pays over this threshold annually on wages they must now pay 0.5% of their paybill directly into a fund. The government then adds an extra 10% (in England) to the fund, which is used by employers across the UK to spend on apprenticeship training.

Why Is This Being Introduced?

The current UK government is investing strongly in apprenticeships and training, helping to develop vocational skills and to increase the quantity and quality of apprenticeships offered in the UK.

By 2020, the government hopes to introduce 3 million new apprenticeships in England.

With the Apprenticeship Levy, the government is increasing funding in apprenticeships, helping to create the new targeted apprenticeships and enabling employers to offer quality training and receive more than they put in by training more apprentices going forward.

How Was the Levy Introduced?

Originally announced during the Summer Budget in 2015 and again at the Autumn Statement 2015, the new Apprenticeship Levy was announced to come into effect as of April 2017.

To make sure that the Levy worked for everyone, the government held a consultation between employers from the 21st August 2015 and 2nd October 2015.

I Offer Apprenticeships - Will I Have to Pay the Levy?

For most employers in the UK, you will not have to pay the Levy.

It only applies to businesses who pay out more than £3 million per year on their pay bills.

If you are over this threshold, you will have to contribute to the levy through PAYE every month. Each employer also gets £15,000 to offset against their levy payment, which will work in a similar way to personal tax allowance.

If you are not eligible to pay for the Levy, you can still benefit from it. Read on for more details.

Who Will Benefit from the Apprenticeship Levy?

In short, everyone.

With more funding from high turnover employers and the government, the changes to apprenticeships through the Levy mean that the government will now fund apprenticeships for all ages.

Funding was previously targeted specifically depending on different factors in the old system – with the new Levy system in place, the government offers opportunities to more people, including existing staff at an organisation looking to expand their skills further.

I Don’t Have to Pay the Levy, How Does it Benefit Me as An Employer?

As we stated previously, employers whose pay bill is less than £3 million on an annual basis are not eligible to pay the Levy.

However you can still benefit from the Levy – in fact, that’s the main reason the Levy exists.

If you were to take on an apprentice, 90% of the apprentice you offer’s funding/training costs will be paid by the government up the maximum funding band available. You will need to pay 10% towards any costs for apprentices who are aged 19 or over.

For smaller companies – with fewer than 50 employees – the government will now pay all the costs for new apprentices aged 16 to 18 and also for those aged 19 to 24 who are leaving care or have a Local Authority and Healthcare plan.

Businesses with under 50 employees won’t pay anything if they employ apprentices under the age of 19, and will receive a £1,000 payment with an additional £1,000 payment to the training provider.